Interest rate angst hasn't stopped Twin Cities homebuyers

Higher mortgages haven't stopped homebuyers — or prices — from growing this spring in the Twin Cities metro.

Last month, buyers signed 4,028 purchase agreements, 7.8% more than last year at this time, according to a monthly sales report from the Minneapolis Area Realtors. Closings, a reflection of deals signed a couple months ago, were flat compared with last year, and the median price of those closings was $366,000, a 2.8% increase from last year.

"It's clear that people are ready and eager to get deals done," said Jamar Hardy, president of Minneapolis Area Realtors, in a statement.

Sellers broke a listing logjam this spring, bringing thousands of new listings to market. New listings were up 4%, causing the total number of listings for sale at the end of the month to increase 8.4% to 6,879.

The March report marks the fifth-consecutive month of year-over-year increases in new listings and the fourth-consecutive increase in pending sales.

Those gains are a likely sign buyers and sellers have finally adjusted to today's mortgage rates — which are now in line with historic averages but nearly double what buyers nabbed two years ago — and are ready to move despite them.

"We pushed ahead," said Luke Bolton, a financial services executive who recently listed his Minneapolis condo as part of a plan to move to a new build that's closer to his in-laws in Des Moines, Iowa. "Our boys are not getting younger, their grandparents in Iowa are not getting younger, and life goes on regardless of what the Fed and inflation does to the mortgage interest rates."

Bolton started preparing for the move last summer by clearing out the house, either selling or giving away unneeded items. The family refinished the kitchen cabinets, rented a storage unit for overflow items, and — after almost daily trips to the storage locker — they were ready to list the house in early March. That timed perfectly with a spring break trip to visit the Iowa in-laws that also made it easier for their agent to show the house while they were out of town.

"Waiting for the listing date was perhaps the hardest, since we have two active boys and didn't want to mess up the house," Bolton said. "So I got a family membership at Sky Zone and spent most of our free time between school and bedtime outside of our house."

The two-bedroom, two-bathroom condo listed at $199,900, making it affordable to many first-time buyers.

Their agent, Jonathan Sells, said after several showings, he quickly received an offer on the house, which has yet to close.

Sells said with more listings this spring, buyers have move choices and more time to decide.

"I like seeing more balance in the market," Sells said. "It's no longer a 20-offers-in-two-days frenzy, which is pretty stressful for buyers. Balance is a good thing, and we're working toward that with more inventory.'

Sells and other agents said while the pace of the market is far less frenetic than in past years, some listings in some areas are still receiving multiple offers and are selling for more than the asking price.

On average, houses across the metro sold in 54 days, four days faster than last year. And sellers accepted offers at 98.8% of their asking price, up 0.2% from last year.

The trends were similar across the state. Also Monday, the Minnesota Association of Realtors, which includes members in virtually every county across the state, said new listings increased 7.3%, slightly behind pending sales, which increased 11%.

The group said the median price of all sales increased 4.7% to $335,000, while the average market time declined 3.9% to just 49 days.

The group said demand varied dramatically from region to region but also based on price point and property type. It said the Detroit Lakes, Alexandria and Brainerd areas saw the largest gains in new listings. Pending sales increased the most in around Bemidji, Alexandria, St. Cloud and Brainerd. Prices increased the most in the Fergus Falls, Alexandria and Detroit Lakes regions. The places that were most evenly balanced between buyers and sellers included Detroit Lakes and Bemidji.

The tightest areas, meaning those with more buyers than sellers, included Rochester, St. Cloud and the Twin Cities.

Across the state, buyers and sellers are still grappling with the prospect that mortgage rates are likely to remain near 7% through much of the year after a recent inflation report dimmed hopes of a Fed rate cut sooner than later.

On Thursday, the 30-year fixed-rate mortgage averaged 6.88%, according to a weekly Freddie Mac survey. That's up slightly from the previous week and about a half-percentage point higher than a year ago.

Bolton said while mortgage rates were definitely a consideration in his decision about when to sell, it wasn't a top priority. Like many buyers who are struggling to swallow the reality their mortgage payment is going to be several hundred dollars more than it would have been in early 2022, the Boltons are crossing their fingers they'll be able to refinance in two to three years if the rates fall.

"Some things are more important than merely financial considerations, such as family," he said. "So we are closing our eyes to the relatively high interest rates now and moving ahead with the plan."